The UK-New Zealand trade deal Strategy vs value
- New Zealand will more benefit the UK geopolitically than economically.
- It boosts our post-Brexit global goals towards Pacific markets, and is a step towards diversifying our trading relationships outside the EU. The agreement provides alternative markets for businesses which are tariff free, and designed to promote particular services and digital trade.
- SMEs have been accounted for more than they have in any trade deal before.
On Wednesday, the government announced the Agreement In Principle between the UK and New Zealand. Analysis has suggested that long term, the deal will not have a particularly advantageous impact on our GDP. However strategically, it is significant in a few ways. Firstly, the commitments go further than previous FTAs have done on topics such as gender equality and labour protection, sustainability, and includes a standalone chapter dedicated to SMEs. Secondly, the agreement goes a long way to securing our interests in the Trans-Pacific, specifically the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which is a tariff free trading bloc expected to increase rapidly in economic value. Finally, in the context of numerous other negotiations also taking place, it signals a strong departure from our reliance on EU trade.
What does the agreement offer?
According to the World Bank, New Zealand ranks number one for the easiest partner with whom to do business, and with a mutual agreement to make that even easier, members should consider taking full advantage of the benefits the deal has to offer.
New Zealand has a fast-growing technology sector, in particular telecommunications and fintech. Within the deal, the UK and New Zealand have committed to market access that supports long-term stability, certainty and competitiveness of both countries’ financial services sectors. The agreement promotes sustainable finance through the sharing and promotion of best practice and cooperation in international forums. It will maintain high standards of transparency, preserving both countries’ rights to regulate where it is necessary for local privacy requirements.
New Zealand also boasts an exponentially growing e-commerce sector. As the UK seeks to cement its position as a leader in digital and technological services, this opens up opportunities for British businesses. The agreement includes a chapter on digital trade, with a primary focus on responsible data handling, which enables data flows within open and competitively fair markets, respecting privacy requirements, while avoiding unjust data localisation. It will reduce barriers to digital trade by encouraging paperless transactions within the current international framework. Importantly, it will also commit to working on cybersecurity resilience.
Since trade policy has risen in importance for UK businesses following our departure from the single market, it is encouraging that there is a chapter dedicated to promoting SME participation in international trade. The deal will identify ways to help smaller businesses take full advantage of the FTA by “establishing and maintaining information in digital form, that SMEs can draw on when trading, investing, and doing business in respective markets”.
Data from our monthly Policy Voice surveys has consistently shown that small businesses have been hit hard by Brexit in terms of cost, administration and competition. The agreement with New Zealand reduces many of these burdens by providing tariff free trade that respects competition, and is committed to facilitating cross-border service trade.
What are critics saying?
It is true that the agreement has generated criticism within the agricultural industry. Agriculture is one of New Zealand’s biggest exports, and this has created potential threats to our own local farming trade, particularly in Scotland and Wales. Industry experts have spoken out against the environmental impact that shipping meat from the other side of the world will have, which does not necessarily comply with high UK standards, and creates competition for our local farms.
This has been countered with the argument that agriculture trade with New Zealand can actually seasonally complement the UK farming industry, in that during our winter period, we will now have access to what is eventually going to be tariff-free New Zealand produce. However, amidst the uncertainty in the face of this, the government should work with UK farms to address concerns.
The post-Brexit perspective
The EU has been negotiating with New Zealand for an FTA since 2018, but signed a Partnership Agreement in 2017 based on cooperation that comes from consistent dialogue. This means that, while both parties encourage mutual recognition and promotion of each other’s standards in relation to bilateral trade, common tariffs and regulations on standards still apply.
It may be that the benefits of this agreement are primarily geopolitical. But the agreement is also wide reaching, and forward looking in terms of both the service sector and digital opportunities. With service trade having been overlooked in the Trade and Cooperation Agreement between the EU and the UK, it is positive that there are alternative, tariff free markets that UK businesses have access to.
Useful links:
UK-New Zealand Agreement In Principle
UK-New Zealand Agreement In Principle explainer:
